UK and international donors suspend Tanzania aid after corruption claims

Payments of $490m frozen following claims that high-ranking officials siphoned off funds from the country’s central bank

Donors to Tanzania’s general budget support programme include the UK, Canada, Denmark, the European commission, Finland, Germany, Ireland, Japan, Norway, Sweden and the World Bank.
Photograph: Daniel Hayduk/AFP

International donors have suspended nearly $500m (£311m) in budget support to Tanzania in response to claims that senior government officials siphoned off funds from the country’s central bank under the guise of energy contracts.

The chair of Tanzania’s public accounts committee, Zitto Kabwe, said several high-ranking officials colluded with corrupt businessmen to transfer $122m from a holding account in the central bank to private accounts overseas.

A group of 12 funders, including the UK’s Department for International Development (DfID), have given Tanzania $69m for general budget support so far this year and the group has committed to contributing $559m towards the current budget.

The donors announced, however, that they would suspend further general budget support payments until more information about the scandal has been released, freezing $490m in financing.

“Disbursements have not been made because we are waiting for the controller auditor general report and the government action following that,” said Sinikka Antila, Finland’s ambassador to Tanzania and chair of the donors’ general budget support committee.

“If in the report there is misappropriation or some wrongdoing, then we want to see prudent action by the government.”

Two businessmen have been accused by Kabwe of selling mispriced electricity to the government of Tanzania over the past two decades. Kabwe’s committee is investigating the scandal.

Tanzania has struggled to generate electricity and its economy has been plagued by power shortages. Lawmakers and donors bemoan the effect of corruption on the country’s development.

“We have been having huge problems with electricity in Tanzania for the last 20 years,” said Kabwe, who is a member of parliament for Chama cha Demokrasia na Maendeleo, Tanzania’s main opposition party. “There is no story of power in Tanzania, of the energy sector in Tanzania, without corruption.”

The World Bank and the International Monetary Fund have long been involved in infrastructure projects in the country, with the World Bank overseeing more than $230m of financing to the country. But their willingness to work with government officials has meant that they are “becoming allies of the corrupt regime”, Kabwe said.

Donors to Tanzania’s general budget support programme include the African Development Bank (AfDB), Canada, Denmark, the European commission, Finland, Germany, Ireland, Japan, Norway, Sweden, the UK and the World Bank.

General budget support is designed to fund programmes “in accordance with the government’s development priorities”, most of which focus on poverty alleviation, according to Antila.

A DfID spokesman said: “The UK takes a zero tolerance approach to fraud and corruption. In line with other donors, we will not disburse any further budget support to Tanzania until we have considered the findings of the inquiries currently under way.”

Politicians are worried that the scandal could taint Tanzania’s political and business climate as it prepares for large-scale gas production in the coming years.

“It’s about the credibility of the country before the eyes of the international community and international investors, but also the impunity that public officials can be involved in corrupt deals and the prime minister will stand up and defend them,” Kabwe said.

“This is the right time to fight and set very strong deterrent measures against corruption, because if we don’t do this now, the moment we start to receive a lot of gas revenues … we are going to have a big problem.”

• This article was updated on 15 October 2014 to include a statement from the UK’s Department for International Development